Stock Options

[stok OP-shuhnz]

What is the definition of Stock Options?

Financial derivatives that provide the holder the right, but not the obligation, to buy or sell a specified number of shares of a company's stock at a predetermined price within a specified time period.

Using Stock Options in an Example

A company grants an employee stock options as part of a compensation package, allowing the employee to purchase 1000 shares of the company's stock at $10 per share within the next five years. If the company's stock price rises to $20 per share, the employee can exercise the options to buy the shares at the lower price of $10, potentially doubling their investment upon selling the shares at the current market price.

Using Stock Options in a sentence

During the meeting, the CFO explained the benefits of offering stock options to employees, highlighting how it incentivizes performance and aligns their interests with the company's growth.

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